Solving Israel's Housing Crisis
Updated: Feb 20
Ynet featured a podcast with a panel of experts on how to solve Israel's housing crisis.
Here's a brief summary:
Historically, the crisis can be traced to the 90's and the fall of the Soviet Union. Soviet Jewry began moving to Israel en mass.
The government planned for 40,000 new immigrants a year. As it turned out, 40,000 came every month.
Israel, therefore, has a serious deficit in housing and the construction industry cannot keep up. Everyone understands the rules of supply and demand and in the circumstances housing prices have rocketed.
A: Pinui Binui (evacuate and rebuild)
Many cities have old and decrepit neighborhoods that contain buildings that are in serious state of disrepair and are not even earthquake proof. They need to be torn down and replaced with taller and more spacious apartment blocks.
B: Expansion of periphery cities
Certain cities in the periphery of the country, such as Ashdod and Beer Sheva in the south and Afula and Kiryat Shmoneh in the North have for the capacity for doubling in size
C: A metropolis in the Negev
Israel's Negev desert has room for not just a city, but a sprawling metropolis.
Freeing up land for building, i.e. changing its taba, is a process that can take more than a decade.
Pinui Binui is also a bureaucratic and legal process that can take well over 7 years.
These processes need to be shortened, but there is a lack of political will.
B: Political will
Only two of Israel's finance ministers in the past two decades, Yair Lapid and Moshe Kachlon, have taken this problem seriously. Kachlon placed this issue at the forefront of his policies.
He increased purchase tax for investors and foreign buyers in order to reduce demand, and he started a new programme, mechir lemishtaken, to help first time buyers. He also tried but failed, to create a punitive landlord tax, to discourage investment and encourage landlords to sell.
However these were just band-aids to a problem of supply and demand.
Kachlon was fought all the way and eventually was exhausted and retired from politics.
Yair Lapid tried to introduce a zero VAT on housing. However, he had many political enemies and his coalition partners ensured that he would fail.
Israel's latest housing minister, Ze'ev Elkin has publicly stated that he expects house prices to rise and that there's little he can do. In this very fractured coalition, he's clearly not up for the political fight that's needed.
Consequently, the panel's attitude was quite somber. They didn't believe that any serious new initiatives would be advanced. They believed that house prices would only continue to go higher and higher.
It is therefore, still a good time to invest in Israel. Contact us today.